## Facts

- Dell Inc., a publicly traded technology company, completed a 2013 going-private merger led by Michael Dell and Silver Lake Partners.
- The merger consideration was $13.75 per share in cash, increased from $13.65 after stockholder pressure.
- Dell’s board used a special committee and conducted a lengthy negotiation process, followed by a go-shop period; no superior bid emerged.
- The transaction was approved by a majority of unaffiliated stockholders.
- Stockholders holding tens of millions of shares perfected appraisal rights under 8 Del. C. § 262 and sought a judicial determination of “fair value” as of the merger date.
- Petitioners argued Dell’s fair value materially exceeded $13.75 and relied primarily on discounted cash flow (DCF) valuation based on management projections.
- Dell argued the merger price best reflected fair value given the sale process and market checks.

## Issues

1. In a statutory appraisal under 8 Del. C. § 262, whether the deal price from a management-led buyout with an extensive sale process should be treated as the best indicator of fair value.
2. Whether the court should instead give primary weight to an independently derived DCF valuation that yields a higher per-share value.

## Decision

- The Court of Chancery determined the fair value of Dell common stock as of the merger date to be $17.62 per share.
- The court declined to treat the $13.75 deal price as the principal measure of fair value, finding it informative but not determinative.
- The court relied primarily on its own DCF analysis, selecting and adjusting key inputs (including projections, terminal growth, WACC, and capital structure assumptions).
- The court entered judgment awarding petitioners $17.62 per share plus statutory interest.

## Legal Principles

- In an appraisal proceeding, the court must determine “fair value” as of the merger date, excluding value arising from the accomplishment or expectation of the merger.
- The court must consider “all relevant factors”; no single indicator (including deal price or market price) is dispositive.
- Sale-process evidence is not a substitute for valuation, but it may affect how much weight the court gives to market-based indicators such as deal price or unaffected trading price.
- A deal price from a management-led, private-equity-driven process may warrant skepticism where the court finds bidder pricing constrained by leveraged-buyout return targets and where market pricing may not reflect long-term value.

## Conclusion

The Court of Chancery appraised Dell at $17.62 per share—about 28% above the merger consideration—concluding that, despite a substantial market check, the management-led, financial-sponsor-driven process and perceived market “valuation gap” made a DCF-based going-concern valuation more reliable than the deal price for determining statutory fair value.


In re Appraisal of Dell Inc., No. 9322-VCL, 2016 WL 3186538 (Del. Ch. May 31, 2016)